Americas News
Gasoline Draw Ignored, Rate-Obsessed Traders Cause Third Straight Drop In Oil
A rise in U.S. crude inventories coupled with ongoing fears of demand declines due to central banks postponing rate cuts resulted in a third straight session of losses for oil on Wednesday.
In the previous session,U.S. Federal Reserve governor Christopher Waller said in a speech in Washington that, "In the absence of a significant weakening in the labour market, I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy."
The irony of the central banks staying on course is that it is keeping inflation higher by holding down consumer spending.
Still, data from the Energy Information Agency showed that demand for gasoline rose last week (stockpiles fell by 910,000 barrels); however, this good news took a back seat to crude stockpiles rising by 1.8 millon barrels, the highest in 10 months.
Brent fell 98 cents to $81.90 per barrel, and West Texas Intermediate fell $1.09 to $77.57 per barrel.
Bloomberg noted that multiple gauges signalled weakness in the physical market: "Brent's prompt spread remains close to flipping into a bearish contango structure for the first time since January — an indication of plentiful supply relative to demand; meanwhile, the Brent DFL — a measure of Dated Brent relative to futures — also recently turned negative."
Tamas Varga, analyst at PVM, said, "The view on the fundamental outlook remains grim."
The perception that demand is weakening (despite last week's gasoline draw in the U.S.) was helped along by reports that refiners were buying less crude when the expectation was they would be buying more, due to increasing refinery capacity.
As if to cause even more hand wringing within the analytical community, the EIA on Wednesday warned that "The potential for a stronger hurricane season suggests heightened risk for weather-related production outages in the U.S. oil and natural gas industry."
However, while severe weather has become a trigger for alarmist headlines of late, rarely does chaos result: the 2023 Atlantic hurricane season saw just one out of 20 named storms touch down in the U.S., without causing any disruption or damage of oil and gas facilities.
